JERUSALEM -- Responding quickly to U.S. and Israeli demands at the highest level that he speak out, Yasser Arafat yesterday condemned the recent killing of an Israeli settler by allies in his Palestine Liberation Organization and called for an end to violence "to safeguard the peace process."

Mr. Arafat's statement, representing what is believed to be his first public denunciation of a lethal attack on an Israeli by Palestinian nationalists, was welcomed as "a very positive sign" by President Clinton.

At the White House on Friday, the president had joined Israeli Prime Minister Yitzhak Rabin in insisting that the Palestinian leader was duty-bound to condemn Arab attacks on Israelis.

Mr. Clinton said yesterday as he left Washington for Memphis that Mr. Arafat's comments would help Israel and the PLO to put into effect their mid-September agreement in principle on starting Palestinian self-rule in the occupied West Bank and Gaza Strip.

Mr. Rabin, who was in New York City yesterday, did not comment directly on the Arafat announcement from PLO headquarters in Tunis -- either to welcome it or to say, as other Israeli officials did, that the PLO chairman had done what was minimally needed to keep a political problem for the Rabin government from snowballing.

In a terse statement issued by aides, the prime minister noted that in September, Mr. Arafat had renounced violence and promised to discipline anyone under his command who violated that commitment. The test of this pledge "will be in ceasing all terror and violent activities by this organization," Mr. Rabin said.

The Israeli prime minister added that he would not be sidetracked by terrorists from an agreement that is supposed to lead a month from today to the start of an Israeli troop withdrawal from Gaza and the West Bank city of Jericho.

Negotiations on the details of that withdrawal and a companion Palestinian assumption of authority are expected to resume in Cairo tomorrow after a break of several days.

In the short run, the swift response from Tunis seemed likely to defuse a bubbling crisis that suddenly spilled over on Friday when the Israeli army announced that it had captured five young Palestinians who were suspected of killing a West Bank settler on Oct. 29 and who identified themselves as members of Al Fatah, Mr. Arafat's PLO faction.

The long run is not so clear, though. Israeli public support for the self-rule accord has plainly eroded. It is far from certain that Mr. Arafat's condemnation of violence will be enough to persuade skeptical Israelis that the PLO leader is sincere and, even if he is, that he can control events in the territories, where factional violence is a commonplace.

The army's disclosure that it was holding members of Al Fatah as suspects in the death of Haim Mizrachi was unquestionably embarrassing both to Fatah leaders and to Mr. Rabin. So a blunt message was sent to Mr. Arafat by the U.S. and Israeli leaders: He was "duty-bound at a minimum," in Mr. Clinton's words, to condemn the violence.